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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D. C. 20554
In the Matter of )
) File No. EB-00-TC-005
NOS Communications, Inc. and )
Affinity Network Incorporated )
)
Apparent Liability for Forfeiture ) NAL/Acct. No.
200132170011
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: March 28, 2001 Released: April 2,
2001
By the Commission: Commissioner Furchtgott-Roth dissenting and
issuing a statement.
I. INTRODUCTION
1. By this Notice of Apparent Liability for Forfeiture
("NAL"), we find that NOS Communications, Inc. (``NOS'') and
Affinity Network Incorporated (``ANI'')1 have apparently
willfully or repeatedly violated section 201(b) of the
Communications Act of 1934, as amended ("Act"),2 by engaging in
unjust and unreasonable practices in connection with their
provision of interstate communication services. As discussed
more fully below, we find that NOS and ANI have apparently
engaged in deceptive marketing of their interstate communication
services by failing to disclose clearly and conspicuously
material facts regarding their promotional plan offerings and
pricing methodology.
2. The Commission received almost 900 consumer complaints
against NOS and ANI. Based upon our review of the facts and
surrounding circumstances, we find that NOS Communications, Inc.
and Affinity Network Incorporated are apparently liable for
proposed forfeitures in the amount of $500,000 each, resulting in
a total proposed forfeiture amount of $1,000,000.
II. BACKGROUND
3. NOS and ANI are long distance service resellers that
primarily market to small and medium-sized companies. NOS and
ANI solicit new customers through telemarketing calls.
As described more fully below, NOS and ANI employ what they term
a ``call unit rate structure'' for their long distance pricing
methodology. Under that pricing methodology, which appears to be
unique to these companies, rates are billed not in terms of cents
per minute, but in cents per call unit (``CPCUs'').3 The call
unit is made up of usage and non-usage charges, and generally
does not equal a minute.4 Thus, determining total per call
charges requires a conversion calculation. NOS and ANI state
that, during telemarketing calls, they provide potential
customers with both verbal5 and written disclosures explaining
their plan offerings and charges. They also state that in
addition to information conveyed by their telemarketing
representatives, they routinely fax prospective customers two
written disclosures, a ``rate sheet'' and an enrollment form or
Letter of Agency (``LOA'') to explain their service and pricing.
4. Despite the purported pricing explanations by NOS and
ANI, consumers have filed almost 900 complaints with the
Commission against the companies since 1997. These complaints
suggest widespread consumer confusion regarding the companies'
plan offerings and charges. Common themes in these complaints are
that NOS and ANI misrepresent their rates, resulting in rates
charged that are substantially higher than what the companies
promised. Consumers also complain that NOS's and ANI's call unit
pricing methodology is complicated and confusing and appears
designed for the purpose of cheating the public.6 Complainants
allege that when they complain directly to the companies, the
companies are unresponsive or claim ignorance or error, often
promising credits and discounts which never materialize.7 Many
complainants also allege that when they refused to pay disputed
bill amounts, they were threatened with collection or legal
action, or their toll-free numbers were ``held hostage'' by the
companies.8 Additionally, complainants state that when they
attempted to discontinue service with NOS or ANI, they
experienced undue delays or difficulties switching carriers, or
continued to be billed for services by the companies after the
switch was complete.9
5. In addition to complaints filed with the Commission,
NOS and ANI have received complaints directly from consumers, but
have requested confidential treatment of the number of such
complaints as well as the number of requested cancellations of
service that they receive.10 Hence, this information will not be
revealed here.
III. DISCUSSION
6. Section 201(b) of the Act, states, in pertinent part,
that ``[a]ll charges, practices, classifications, and regulations
for and in connection with such communication service, shall be
just and reasonable, and any such charge, practice,
classification, or regulation that is unjust or unreasonable is
hereby declared to be unlawful.''11 The FCC has found that
unfair and deceptive marketing practices by interstate common
carriers may constitute unjust and unreasonable practices under
section 201(b).12
A. Calculating the Rate
7. Understanding how NOS and ANI calculate their charges
is central to any discussion of whether the companies have
unjustly and unreasonably marketed their services. Although the
companies assert that calculation is not difficult, we disagree,
finding the process both complicated and confusing.13
8. To illustrate, we borrow from materials that ANI
provided to a customer. The example concerns a nine-minute,
interstate call at 14.9 cents per call unit.14 The first step in
calculating total charges under the call unit rate structure is
to identify the call duration in seconds. A nine-minute call
equals 540 seconds (9 x 60). Next, to determine the usage
charges, the minimum call unit (MCU) and any additional call unit
increments (ICUs) must be determined. For interstate calls the
MCU is 30 seconds, which is described as being the same as 5
ICUs. Additional ICUs are added in increments of 5 for each
additional 30 seconds. Thus, at 14.9 cents, the MCU equals
$0.745 ($0.149 x 5 ICUs).15 After adjusting for the 30-second
MCU (540 seconds - 30 seconds), the remaining seconds are divided
by 30 seconds to determine the additional ICUs (510 seconds ¸ 30
seconds = 17). At 14.9 cents, the additional ICUs equal $12.665
($0.149 x 5 ICUs x 17 or $0.149 x 85 ICUs).16 To determine non-
usage charges, the equivalent call units (ECUs), must be
determined. ECUs are provided by a table, and are based upon
call duration. For 540 seconds, the table states that the total
ECUs are 95. At 14.9 cents, the ECUs equal $14.155 ($0.149 x
95).17 The sum of the charges for the MCU, ICUs, and ECUs equal
$27.565.18 This amount is then rounded to $27.6 and divided by
10 to get the final bill amount ($27.6 ¸ 10 = $2.76).19 If we
take this example one step further and divide the total charge of
$2.76 by 9 minutes (the duration of the call), the result is an
actual per call rate of 30.6 cents per minute, as compared to
14.9 cents per call unit.
9. We believe the foregoing example demonstrates the
complexity of the call unit pricing methodology, which employs
MCUs, ICUs, and ECUs to determine usage and non-usage charges.
To determine the total charge of a call under call unit based
rates, the customer must have detailed information regarding each
of the aforementioned call unit components, as well as
instructions on conversion calculation.20 Based upon the
foregoing, NOS's and ANI's use of the call unit rate structure
would almost certainly be misleading to consumers in the absence
of clear and conspicuous disclosure regarding the nature and
components of the rate structure, as well as clear and
conspicuous disclosure on how to calculate the total cost of a
call.
B. Plan Disclosures
10. Until recently,21 NOS and ANI used promotional plan
offerings as their primary vehicle for marketing their
communication services to customers. These promotional plan
offerings were not expressly denominated as promotional, however.
The companies marketed and sold these plans in terms of cents per
minute. Then, following the second billing period, the companies
calculated the charges based on the call unit rate structure.
According to NOS and ANI, the companies calculated the cents-per-
minute rate by waiving non-usage charges for peak domestic calls
during the first two invoices. After the second invoice, non-
usage charges did apply.
11. We believe that consumers would likely view the limited
duration of NOS's and ANI's promotional rates as significant
qualifications. NOS's and ANI's promotional plan offerings,
although marketed in cents per minute, are really equal to a call
unit based rate with non-usage charges waived for the first two
invoices only. As can be seen from the example of the 9-minute,
interstate call, non-usage charges make up a significant portion
of the total cost of a call (almost half, in the example). Thus,
the application of non-usage charges to a call after a customer's
second invoice could result in double the cost of that call as
compared to a similar call made during the promotional period.
Therefore, although NOS and ANI clearly disclosed the cents-per-
minute rate, we must determine whether they clearly and
conspicuously disclosed the limited duration of that rate and the
rates to be charged thereafter.
a. ``Rate Sheet''
12. During sales calls, NOS and ANI appear to have faxed
prospective customers a ``rate sheet'' which sets forth the
companies' rates and plan offerings. The rate sheet states the
rate in cents per minute in bold letters at the very top of the
page.22 Nowhere does the rate sheet expressly state that the
advertised per minute price is a ``promotional'' or
``introductory'' rate. Near the bottom of the rate sheet, under a
heading entitled ``No Contracts or Term Plans,'' the sheet states
that ``[s]tandard tariffs on file with the FCC apply to all calls
after the first two invoices and, during the first two invoices,
to all calls except peak interstate & peak intrastate calls.''
The rate sheet further states that ``[n]on-transport/usage
charges apply per carrier's tariff'' and that ``[p]romotion terms
per tariff on file.''
13. We believe these purported qualifications on the rates
expressly set forth in NOS's and ANI's rate sheets lack clarity
and understandability. Rather than provide clear and conspicuous
disclosure of the promotional nature of their cents-per-minute
offering and of the rates that will apply after that period, the
language serves only to obfuscate and to confuse. The language
does not clearly indicate to the consumer that the advertised
cent-per-minute rates are of limited duration, particularly given
the unrelated heading. We believe that a reasonable consumer
would not gather that the quoted rates are promotional.
14. Additionally, we believe the reasonable consumer would
not understand that the companies would use anything other than
the widely used and understood cents-per-minute pricing
methodology. First, there is no clear language on the rate
sheets indicating otherwise. Second, the only quoted rates are
set forth in cents per minute. Third, only vague references
regarding the call unit rate structure are provided. While the
term ``non-transport/non-usage charges'' is used, it is not
defined or explained. In short, nothing in the rate sheets
notify the customer that the call unit pricing methodology would
be used after the undefined promotion, or what that pricing
methodology entails.23
15. In light of the foregoing, and our review of the
confidential materials submitted by the companies, we believe
that the rate sheets distributed by NOS and ANI mislead consumers
about the fact that the quoted rate is a promotional rate, fail
to inform consumers that a different pricing plan will apply
after that period, and fail to inform consumers how the non-
promotional pricing plan will operate.24 Therefore, by widely
distributing the rate sheet to consumers in the marketing of its
long distance plans, we find that NOS and ANI have apparently
engaged in unjust or unreasonable marketing practices in
violation of section 201(b) of the Act.
b. Letters of Agency (LOAs)
16. NOS and ANI fax what they refer to as an LOA to
prospective customers together with the rate sheet.25
The ostensible purpose of this document is to secure
the customer's written consent to have its
interexchange carrier switched to NOS or ANI. However,
the document contains additional information beyond
what is allowed by our LOA rules.26 Therefore, as an
LOA, the document is invalid.27 A valid LOA may
contain only certain authorizing language as set forth
in our rules.28 While we do not mean to suggest that a
carrier may cure a misrepresentation that violates
section 201(b) with a violation of our LOA rules, we
reviewed the document to see if NOS and ANI made any
attempts to clarify the terms of their promotional plan
offering and the nature of their rate structure for the
consumer. The document states, near the end of a
fairly lengthy paragraph, that ``[s]tandard tariff
rates on file with the FCC and state commissions apply
to all calls.'' It also states that "[n]on-usage
charges apply per carrier's tariff," and that
"[p]romotion terms per tariff on file." This language
suffers from the same lack of clarity and
understandability as the rate sheets. Further, the
language does not alert the consumer that anything
other than the cents-per-minute pricing methodology is
applicable, and makes only vague references to the call
unit rate structure. Here again, the term ``non-usage
charges'' is used, but not defined or explained. Thus,
as with the rate sheet, the language does not provide
the consumer with enough information to determine total
per call charges after the expiration of the
promotional period.29
C. Forfeiture Authority
17. Section 503(b)(1) of the Act states that any person
that willfully or repeatedly fails to comply with any provision
of the Act or any rule, regulation, or order issued by the
Commission, shall be liable to the United States for a forfeiture
penalty.30 Section 503(b)(2)(B) of the Act authorizes the
Commission to assess a forfeiture of up to $100,000 for each
violation, or each day of a continuing violation, up to a
statutory maximum of $1,000,000 for a single act or failure to
act.31 In determining the appropriate forfeiture amount, we
consider the factors enumerated in section 503(b)(2)(D) of the
Act, including "the nature, circumstances, extent and gravity of
the violation, and, with respect to the violator, the degree of
culpability, any history of prior offenses, ability to pay, and
such other matters as justice may require."
18. NOS's and ANI's failure to make clear and conspicuous
disclosures in their rate sheets appear to demonstrate conscious
disregard for section 201(b)'s prohibition against unfair and
unreasonable marketing practices. The rate sheets support a
conclusion that the companies intentionally employed ``bait and
switch'' marketing techniques and withheld information regarding
their promotional offerings and call unit rate structure from
consumers. And the number of consumer complaints filed with the
FCC against NOS and ANI, along with the number of complaints and
service cancellations reported by the companies, further suggest
widespread consumer confusion.
19. Each rate sheet sent to consumers constitutes a
separate violation of section 201(b). In Business Discount Plan,
Inc.,32 the Commission assessed a forfeiture amount of $40,000
for each instance in which the carrier engaged in an unjust and
unreasonable telemarketing practice in violation of section
201(b). In light of the BDP precedent, and weighing the facts
before us, we find that a total forfeiture amount of $500,000 per
company is appropriate. Although a straightforward application
of a $40,000 base forfeiture amount would likely produce a
proposed forfeiture in the millions of dollars, we believe that a
forfeiture of $500,000 per company is sufficient to protect the
interests of consumers and to deter future violations of the
Act.33 In the event the companies continue to violate section
201(b)'s prohibition against unjust and unreasonable marketing
practices, such violations could result in future NALs proposing
substantially greater forfeitures, or could result in issuance of
a show cause order to revoke their operating authority.34 NOS
and ANI shall have the opportunity to submit facts and arguments
in response to this NAL to show that no forfeiture should be
imposed or that some lesser amount should be assessed.
IV. CONCLUSION AND ORDERING CLAUSES
20. We have determined that NOS and ANI have apparently
violated section 201(b) of the Act and the Commission's rules and
orders as identified above. We have further determined NOS
Communications, Inc. and Affinity Network Incorporated are
apparently liable for forfeitures in the amount of $500,000 each.
21. Accordingly, IT IS ORDERED, pursuant to section 503(b)
of the Act, as amended, 47 U.S.C. § 503(b)(5), section 1.80 of
the Commission's rules, 47 C.F.R. § 1.80, that NOS
Communications, Inc. and Affinity Network Incorporated ARE HEREBY
NOTIFIED of an Apparent Liability for Forfeiture in the amount of
$500,000 each, for willful or repeated violations of section
201(b) of the Act and the Commission's rules and orders in the
paragraphs described above.
22. IT IS FURTHER ORDERED, pursuant to section 1.80 of the
Commission's rules, 47 C.F.R. § 1.80, that within thirty (30)
days of the release of this Notice, NOS Communications, Inc. and
Affinity Network Incorporated SHALL PAY the full amount of the
proposed forfeiture OR SHALL FILE a response showing why the
proposed forfeiture should not be imposed or should be reduced.35
23. IT IS FURTHER ORDERED that a copy of this Notice of
Apparent Liability SHALL BE SENT by Certified Mail/Return Receipt
Requested to:
NOS Communications, Inc.
4380 Boulder Highway
Las Vegas, NV 89121
Affinity Network, Inc.
3660 Wilshire Boulevard, Suite 400
Los Angeles, CA 90010
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
DISSENTING STATEMENT OF
COMMISSIONER HAROLD FURCHTGOTT-ROTH
Re: NOS Communications, Inc. and Affinity Network, Inc. Apparent
Liability for Forfeiture, Notice of Apparent Liability for
Forfeiture, File No. EB-00-TC-005, NAL/Acct. No. 200132170011.
The Commission has taken this action under section 201(b) of
the Communications Act without ever conducting a rulemaking to
establish the contours of that provision's applicability to
common carrier advertising. Moreover, as I have explained
before, section 201(b) does not empower the Commission to
regulate common carrier advertising. This enforcement action is
therefore illegal, and I urge the affected parties to seek
judicial review of this decision.
Background. Although section 201(b) has been on the books
for upwards of sixty-five years, the Commission first applied
this provision to common carrier advertising in 1998. In a
notice of apparent liability issued against a long-distance
carrier that had slammed customers, the Commission concluded -
without citing a single precedent - that a company's
representations regarding its product also constituted ``unjust
and unreasonable practices'' under section 201(b). See Business
Discount Plan, Inc., Notice of Apparent Liability for Forfeiture,
14 FCC Rcd 340 [¶ 29] (1998). The Commission decided that the
company ``knowingly misrepresented both its identity as a
reseller and the nature of its service offering in an effort to
[intentionally] mislead small business customers, who relied, to
their detriment, on BDP's misrepresentations of these material
facts.'' Id. [¶ 34].36 Beyond reciting the facts of that case,
the Commission did not explain what it meant by the terms
``knowing misrepresentation,'' ``detrimental reliance,'' or
``material facts.''
The Commission followed up its action in Business Discount
Plan with a policy statement entitled ``Joint FCC/FTC Policy
Statement for the Advertising of Dial-Around and Other Long-
Distance Services to Consumers,'' 15 FCC Rcd 8654 (Mar. 1, 2000)
(hereinafter ``Policy Statement''). There, the Commission acted
though it had for years regulated common carrier advertising
practices under section 201(b), when in fact it had only ever
explicitly addressed that issue in the Business Discount Plan
dockets.37 See id. [¶ 4]. Borrowing from the FTC's truth-in-
advertising rules, the Policy Statement explained if an
advertisement makes an ``implied or express objective claim''
that ``conveys a material representation to reasonable
consumers,'' the advertiser must make sure the representation is
true and be able to substantiate it. Id. [¶ 11]. Advertisements
that might be ``misleading in the absence of qualifying or
limiting information'' must contain ``any necessary
disclosures,'' which must be ``clear and conspicuous.'' Id.
[¶ 12].
The Commission went on to set out what amounts to a detailed
set of rules interpreting this standard and provided examples of
advertisements that would be deceptive. Compliance with all of
these requirements is mandatory:
(1) ``[A]dvertisers should exercise the greatest care in
ensuring the accuracy of their claims related to price,
including the clear and conspicuous disclosure of
information such as minimum per-call charges, monthly
fees, fees for additional minutes beyond the initial
calling period, and other information that significantly
affects the total charge of a particular call or calling
plan or service,'' id. [¶ 13];
(2) ``[A]ny significant conditions or limitations on the
availability of the advertised rates should also be
clearly and conspicuously disclosed,'' id. [¶ 14];
(3) ``[T]he advertiser should clearly and conspicuously
disclose whether the advertised service includes in-state
calls, and the fact that such calls are charged at a
higher rate if such is the case,'' id. [¶ 15];
(4) ``Advertisers should . . . exercise care to adequately
explain phrases such as `basic rates' in their ads. . . .
[W]hen making claims using such terms as `basic rates' or
`regular rates,' advertisers should be mindful that those
terms will be evaluated from the point of view of the
reasonable consumer, and may be deceptive,'' id. [¶ 16];
(5) ``By representing a competitor's rates, an advertiser
is making an implied claim that these rates are
reasonably current. As in the case of any other
objective claim, the advertiser must have a reasonable
basis for this representation,'' id. [¶ 17];
(6) ``The fact that information about significant
limitations or restrictions on advertised prices may be
available by calling a toll-free number or a clicking on
a Web site is generally insufficient to cure an otherwise
decptive price claim in advertising,'' id. [¶ 18];
(7) ``To ensure that disclosures are effective, advertisers
should use clear and unambiguous language, avoid small
type, place any qualifying information close to the claim
being qualified, and avoid making inconsistent statements
or using distracting elements that could undercut or
contradict the disclosure,'' id. [¶ 20];
(8) ``Disclosures that are large in size, are emphasized
through a sharply contrasting color, and, in the case of
television advertisements, remain visible and/or audible
for a sufficiently long duration are likely to be more
effective than those lacking such prominence,'' id.
[¶ 28];
(9) ``[T]he proximity and placement of disclosures are
important factors in determining whether they are clear
and conspicuous. . . The placement of qualifying
information away from the triggering representation . . .
reduces the effectiveness of the disclosure.
Furthermore, when significant qualifying information
about the cost of a long-distance plan or service is
necessary to prevent the ad from misleading consumers,
the user of an asterisk will generally be considered
insufficient to draw a consumer's attention to a
disclosure placed elsewhere in an ad,'' id. [¶30];
(10) ``Even if a disclosure is large in size and long
in duration, other elements of an advertisement may
distract consumers so that they may fail to notice the
disclosure. . . . Advertisers should take care not to
undercut the effectiveness of disclosures by placing them
in competition with other arresting elements of the
ad,'' id. [¶ 31]; and
(11) ``[C]onsiderations specific to television ads
include volume, cadence, and placement of any audio
disclosures. Disclosures generally are more effective
when they are made in the same mode (visual or oral) in
which the claim necessitating the disclosure is
presented,'' id. [¶32].
Today, the Commission applies section 201(b) for the second
time to a common carrier's advertising practices. In contrast to
the facts in Business Discount Plan, however, there are no
allegations of slamming in this case. Rather, the Commission
bases its finding solely on its conclusion that the common
carriers here used rate calculations that were ``complicated and
confusing,'' see Notice of Apparent Liability ¶ 7, and that
disclosures the carriers made regarding their promotional rates
were inadequate, id. ¶ 13. Based on these determinations, the
Commission concludes that each company is apparently liable for
$500,000.
The Commission's advertising rules have not been promulgated
in accordance with the APA. Even assuming that common carrier
advertising were an appropriate concern of the Commission, the
agency's rules regarding this issue have not been promulgated in
accordance with the Administrative Procedure Act. The Commission
came up with a brand-new rule in a 1998 enforcement case, greatly
expanded on that rule in a so-called ``policy statement,'' and
now appears prepared to apply this expanded set of standards
against common carriers generally. Affected parties have never
had an opportunity to weigh in on the matter. I explain below
why the APA does not permit the Commission to apply section
201(b) to common carrier advertising without first conducting a
rulemaking.
1. As an initial matter, it was inappropriate for the
Commission to apply section 201(b) to common carrier advertising
for the first time in an adjudication, as it did in Business
Discount Plan. The APA distinguishes between ``rules'' and
``orders.'' A ``rule'' is ``an agency statement of general or
particular applicability and future effect designed to implement,
interpret, or prescribe law or policy or describing the
organization, procedure, or practice requirements of an agency.''
5 U.S.C. § 551(4). Rulemaking is the ``agency process for
formulating, amending, or repealing a rule,'' id. at §551(5), and
the APA requires agencies to give public notice of a proposed
rulemaking and give interested parties an opportunity to submit
comments on the proposal, id. at § 553(b). An ``order,'' by
contrast, is the ``whole or part of a final disposition . . . of
an agency in a matter other than rulemaking,'' and it is
formulated through ``adjudication.'' Id. at § 551(6), (7).
Notice and comment are not required. Id. at § 554. (Also exempt
from the APA's notice and comment requirements are ``interpretive
rules'' and ``general statements of policy.'' Id. at
§ 553(d)(2).)
The distinction between rulemaking and adjudication is
fundamental: ``[T]he entire Act is based upon a dichotomy
between rule making and adjudication. . . . Rule making is agency
action which regulates the future conduct of either groups of
persons or a single person; it is essentially legislative in
nature, not only because it operates in the future but also
because it primarily concerned with policy considerations. . . .
Conversely, adjudication is concerned with
the determination of past and present rights and liabilities.''
Attorney General's Manual on the Administrative Procedure Act 13-
13 (1947).
Section 201(b) imposes on common carriers the immensely
broad requirement that their ``charges, practices,
classifications, and regulations'' be ``just and reasonable.''
47 U.S.C. § 201(b). But the provision, by its plain language,
does not authorize the Commission to define the scope of a common
carrier's section 201(b) obligations through ad hoc adjudicatory
proceedings. Rather, it directs the Commission to ``prescribe
such rules and regulations as may be necessary in the public
interest to carry out the provisions of this Act.'' Id.
(emphasis added). In other words, to support an action against a
carrier based on an expanded or new understanding of section
201(b), the plain language of the statute requires the Commission
first to promulgate a rule, which can be adopted only after
public notice and comment. See American Mining Congress v. Mine
Safety & Health Administration, 995 F.2d 1106, 1109 (D.C. Cir.
1993) (noting that the Securities and Exchange Act of 1934
``forbids nothing except acts or omissions to be spelled out by
the Commission in `rules or regulations,''' and that ``clearly
some agency creation of a duty is a necessary predicate to any
enforcement against an [mine] operator [under 30 U.S.C. § 813(h)]
for failure to keep records'').
Even if the Commission were not precluded by section
201(b)'s plain language from adopting new interpretations of the
provision in an adjudication, policy reasons required it to
define the contours of a common carrier's section 201(b)
advertising obligations in a rulemaking. As the Supreme Court,
the federal appeals courts, and this agency itself have
recognized, adjudication is most appropriate when an agency seeks
incrementally to develop the law, rather than fundamentally
change it. For that reason, the Supreme Court has held that
``rulemaking is generally a better, fairer, and more effective
method'' of announcing a new rule than ad hoc adjudication. See
Community Television of Southern California v. Gottfried, 459
U.S. 498, 511 (1983); see also Shell Offshore Inc. v. Babbitt,
238 F.3d 622, 627-28 (5th Cir. 2001); Pfaff v. Department of
Housing & Urban Development, 88 F.3d 739, 748 (9th Cir. 1996)
(``The disadvantage to adjudicative procedures is the lack of
notice they provide to those subject to the agency's authority.
While some measure of retroactivity is inherent in any case-by-
case development of the law, and is not inequitable per se, this
problem grows more acute the further the new rule deviates from
the one before it. Adjudication is best suited to incremental
developments to the law, rather than great leaps forward.'');
Curry v. Block, 738 F.2d 1556, 1563 (11th Cir. 1984); First
Bancorporation v. Board of Governors, 728 F2d 434, 438 (10th Cir.
1984); National Small Shipment Traffic Conf. v. I.C.C., 725 F.2d
1442, 1447- 48 (D.C. Cir. 1984) (``Trial-like procedures are
particularly appropriate for retrospective determination of
specific facts . . . [while] [n]otice-and-comment procedures . .
. are especially suited to determining legislative facts and
policy of general, prospective applicability.''). Even where an
agency has discretion to announce a new rule in an adjudication,
there are limits to this discretion. ``Such a situation may
present itself where the new standard, adopted by adjudication,
departs radically from the agency's previous interpretation of
the law, where the public has relied substantially and in good
faith on the previous interpretation, where fines or damages are
involved, and where the new standard is very broad and general in
scope and prospective in application.'' See Pfaff,
88 F.3d at 748 (citing NLRB v. Bell Aerospace Co., 416 U.S. at
267, 295 (1974)) (emphasis added).
The Commission itself has recognized that ``issues of
general applicability are more suited to rulemaking than to
adjudication,'' and numerous occasions it has refused to develop
broad new rules in an adjudicatory context. See Application of
Alton Rainbow Corp. and Cox Radio, Memorandum Opinion & Order,
1999 WL 566130 [18] (1999) (``It is generally inappropriate to
address this argument in a restricted adjudicatory proceeding,
``where third parties, including those with substantial stakes in
the outcome, have had no opportunity to participate, and in which
we, as a result, have not had the benefit of a full and well-
counseled record.''); Application of Great Empire Broadcasting,
Inc. and Journal Broadcast Corp., Memorandum Opinion and Order,
14 FCC Rcd 11145 [¶ 8] (1999) (same); Rulemaking to Amend Parts
1, 2, 21, and 25 Of the Commission's Rules to Redesignate the
27.5-29.5 Ghz Frequency Band, to Reallocate the 29.5-30.0 Ghz
Frequency Band, to Establish Rules and Policies for Local
Multipoint Distribution Service and for Fixed Satellite Services,
Second Report and Order, Order on Reconsideration, and Fifth
Notice of Proposed Rulemaking, 12 FCC Rcd 12545 [¶¶ 388-90]
(1997); Stockholders of Renaissance Communications Corp. and
Tribune Co., Memorandum Opinion & Order, 12 FCC Rcd. 11866,
11887-88 [¶ 50] (1997); Formulation of Policies And Rules
Relating to Broadcast Renewal Applicants, Competing Applicants,
and Other Participants to the Comparative Renewal Process and to
the Prevention of Abuses of the Renewal Process, Second Further
Notice of Inquiry and Notice of Proposed Rulemaking, 3 FCC Rcd
5179 (1988) (``[I]t is generally the view that such decisions are
better left to the rulemaking process where all interested
parties can participate. `Rulemaking,' as the Supreme Court and
the Court of Appeals have recognized, `is generally a better,
fairer, and more effective method of implementing a new
industrywide policy than is the uneven application of conditions
in isolated renewal proceedings.'''); Nextel Communications Inc.,
Order, 14 FCC Rcd 11678 [¶ 31] (WTB 1999) (declining to proceed
through adjudication because to do so would be to establish
spectrum policies of general applicability).
In light of these principles, what the Commission did in
Business Discount Plan was illegitimate. In an enforcement
action against a single carrier, it set forth a broad new
understanding of section 201(b), generally applicable on a going-
forward basis to all common carrier advertising. But section
201(b)'s plain language required it to conduct a rulemaking
before it imposed this new obligation on a carrier. And even
assuming the agency had some discretion to apply a new
interpretation of section 201(b) in an enforcement action, that
discretion is not unbounded. Where fines and damages are
involved, and the new standard is a broad from an agency's
previous regulatory position, as was the case in Business
Discount Plan, courts have held that adjudication is not a proper
vehicle for announcing new law.
2. Not only was the Commission wrong in adopting a new rule
regarding common carrier advertising in Business Discount Plan,
it compounded the problem by expanding on that rule in what it
labeled a ``policy statement.'' The agency's detailed
description of the kinds of advertising practices that will
violate section 201(b) is not a policy statement at all, but
rather amounts to a set of substantive new rules, which are
subject to the APA's notice and comment requirements. Its
attempt to enforce these rules here is therefore improper.
The APA exempts ``policy statements'' and ``interpretive
rules'' from the statute's notice and comment requirements, 5
U.S.C. § 553 (b)(A), while all other rules - which the courts
have often called ``substantive'' or ``legislative'' rules - are
subject to these provisions. A quick review of these statutory
distinctions is helpful.
Although the precise difference between policy statements
and interpretive rules is the subject of some dispute, see
Appalachian Power Co. v. Environmental Protection Agency, 208
F.3d 1015, 1021 n.13 (D.C. Cir. 2000), courts have observed that
a policy statement ``does not seek to impose or elaborate or
interpret a legal norm,'' but rather ``represents an agency
position with respect to how it will treat - typically enforce -
the governing legal norm.'' Syncor International Corp. v.
Shalala, 127 F.3d 90, 94 (1997) (emphasis added). ``By issuing a
policy statement, an agency simply lets the public know its
current enforcement or adjudicatory approach. . . . Policy
statements are binding on neither the public, nor the agency.''
Id. (citations omitted); see also United States Telephone Ass'n
v. FCC, 28 F.3d 1232, 1234 (D.C. Cir. 1994) (``[T]he paradigm of
a policy statement [is] an indication of an agency's current
position on a particular regulatory issue.'').
An interpretive rule, on the other hand, ``typically
reflects an agency's construction of a statute that has been
entrusted to the agency to administer.'' Id. ``The legal norm
is one that Congress has devised; the agency does not purport to
modify that norm, in other words, to engage in lawmaking. . . .
Instead, it is construing the product of congressional lawmaking
`based on specific statutory provisions.''' Id. For these
reasons, ```[t]he distinction between an interpretative and
substantive rule . . . likely turns on how tightly the agency's
interpretation is drawn linguistically from the actual language
of the statute.''' Id. (citing Paralyzed Veterans of American
v. D.C. Arena L.P., 117 F.3d 579, 588 (D.C. Cir. 1997).
Substantive rules, in contrast to both interpretive rules
and policy statements, modify or add to a legal norm, based on
the agency's own authority. Id. at 95. ``That authority flows
from a congressional delegation to promulgate substantive rules,
to engage in supplementary lawmaking.'' Id. Because the agency
is engaged in lawmaking, the APA requires it to comply with
notice and comment. Id.
In determining whether an agency's exercise of regulatory
authority qualifies as a substantive rule, courts begin with an
examination of the applicable statute. Where the authorizing
statute is ``very general, using terms like `equitable' or
`fair,' and the `interpretation' really provides all the
guidance, then the latter will more likely be a substantive
regulation, because then the agency's rule gives content to the
legal norm in question.'' Id. at 94 n.6 (citing Paralyzed
Veterans, 117 F.3d at 588). As the Seventh Circuit has
explained:
When Congress authorizes an agency to create standards, it
is delegating legislative authority, rather than itself
setting forth a standard which the agency might then
particularize through interpretation. Put differently, when
a statute does not impose a duty on the persons subject to
it but instead authorizes (or requires - it makes no
difference) an agency to impose a duty, the formulation of
that duty becomes a legislative task entrusted to the
agency. Provided that a rule promulgated pursuant to such a
delegation is intended to bind, and not merely to be a
tentative statement of the agency's view, which would make
it just a policy statement, and not a rule at all, the rule
would be the clearest possible example of a legislative
rule, as to which the notice and comment procedure . . . is
mandatory.
Hoctor v. United States Dep't of Agriculture, 82 F.3d 165, 169-70
(7th Cir. 1996) (emphasis added).
Also important to the determination whether an agency
publication amounts a substantive rule is whether it prescribes
mandatory requirements. See Syncor, 127 F.3d at 95 (holding that
an agency's decision is substantive if it uses language that is
``consistent only with the invocation of its general rulemaking
authority to extend its regulatory reach.''). In Syncor, for
example, the court concluded that a ``notice'' issued by the Food
and Drug Administration announcing that a certain category of
radioactive drugs should comply with various statutory
requirements was substantive. Although the agency described this
notice as a ``policy statement'' and as ``guidance,'' the court
ruled that the agency's statement that it had ``concluded'' that
these drugs ``should be regulated'' amounted to fundamentally new
regulation, which must be informed by notice and comment
rulemaking. Id.; see also Appalachian Power Co., 208 F.3d at
1023 (``[T]he entire Guidance, from beginning to end, reads like
a ukase. It commands, it requires, it orders, it dictates.
Throughout the guidance, EPA has given the States their `marching
orders' and EPA expects the States to fall into line . . ..'');
Sweet v. Sheahan, 235 F.3d 80, (2d Cir. 2000) (``Legislative
[i.e., substantive] rules can impose obligations on members of
the public distinct from, and in addition to, those imposed by
statute.''); United States v. Picciotto, 875 F.2d 345, 348 (D.C.
Cir. 1989) (holding that rules that ``impose obligations'' are
substantive, whereas rules that ``merely restate existing
duties'' are interpretive).
Applying these principles here, it is clear that the
advertising guidelines set out in the Commission's so-called
policy statement are substantive rules. First, section 201(b) is
a classic example of a congressional delegation to an agency of
lawmaking authority. The provision requires only that a
carrier's ``charges, practices, classifications, and
regulations'' be ``just and reasonable,'' leaving it to the
agency to supply content to these enormously broad terms.
Despite what the Commission might say, it is certainly not
obvious from the text of the statute that a carrier's
``practices'' necessarily include advertising. Indeed, the word
``practices,'' standing alone, is so broad that it could include
virtually any corporate practice. Nor does the statute, on its
face, tell us what ``just'' or ``reasonable'' mean.
In its ``policy statement,'' the Commission gave new meaning
to these terms, and in doing so, acted in its lawmaking capacity.
The agency informed carriers that their advertising practices
would not meet the ``just and reasonable'' standard unless they
ensured the accuracy of their price-related claims, including
information regarding minimum per-call charges, monthly fees,
fees for additional minutes beyond the initial calling period,
geographic restrictions on rates, and comparative price claims.
Policy Statement ¶ 12-15. The Commission also concluded that
section 201(b)'s ``just and reasonable'' standard required
advertisers ``clearly and conspicuously'' to disclose ``qualifying information,'' and it
explained in detail the form such disclosures should take. See
id. ¶ 20-32.
These are plainly new requirements. Even assuming that
Business Discount Plan legitimately announced a new rule (which
it did not), that case dealt only with a carrier's
misrepresentations in the slamming context. The carrier there
told customers that it was a consolidated billing service and
misled them into changing their long-distance carrier. The most
one may make of that case is that section 201(b) applies to a
carrier's illegal slamming conduct, precluding a carrier from
misrepresenting to customers the type of service the carrier
offers and from fraudulently inducing them to change their long-
distance carrier. Business Discount Plan said nothing about the
accuracy of price-related advertising or the need for ``clear and
conspicuous'' disclosures, or any of the other issues the
Commission addressed in its policy statement.
A second sign that the Commission's ``policy statement'' is
actually a set of substantive rules is the mandatory nature of
these new requirements. Section B, for example, is entitled
``Material Information that Should Be Disclosed in Advertisements
for Long-Distance Calling Services.'' Each paragraph in Section
B states that carriers ``should'' disclose specific pieces of
pricing information, and carriers are informed that they
``should'' also ensure that these disclosures are ``clear and
conspicuous.''
In short, the Commission's so-called policy statement is a
substantive rule in masquerade. The agency created a new regime
governing common carrier advertising, with legal consequences for
common carriers. It went far beyond whatever rule it created in
Business Discount Plan. The statement simply does not qualify
as a mere interpretation of an existing rule or a statement of
policy regarding the enforcement of governing law. It is a
substantive change in the law. As such, it should have been
promulgated in compliance with the APA's notice and comment
rulemaking procedures. It was not, and this enforcement action
is therefore illegal.
The Commission Lacks Jurisdiction to Regulate Common Carrier
Advertising Under Section 201(b). As I have written before, I do
not believe Congress intended to delegate to the Commission the
authority to regulate common carrier advertising. See, e.g.,
Commission on the Verge of a Jurisdictional Breakdown: The FCC
and Its Quest to Regulate Advertising, 8 CommLaw Conspectus 219
(2000); Dissenting Statement, Joint FCC/FTC Policy Statement for
the Advertising of Dial-Around and Other Long Distance Services
to Consumers, 15 FCC Rcd 8654 (2000). By specifically giving the
Federal Trade Commission authority to regulate pay-per-call
service advertising in the 1992 Telephone Disclosure and Dispute
Resolution Act, Congress indicated that it did not think this
Commission possessed general jurisdiction to regulate common
carrier advertising. In the preemption context, moreover, the
federal courts have indicated that the Communications Act does
not impose a duty on common carriers regarding advertising. For
these reasons, it is my view that the Commission lacks
jurisdiction to regulate advertising.
* * * *
Although it apparently thinks otherwise, this agency does
not have unlimited authority to enforce against parties any
standard of conduct it might think is appropriate. If the
Commission wishes to regulate common carrier advertising under
section 201(b), it must put its proposed position out for comment
and be prepared to justify whatever rule it fashions to the
public and to
the courts. It has not done this here, and this enforcement
action is therefore unlawful. I dissent from this decision.
_________________________
1 NOS, is a Maryland corporation, whose principal address is
4380 Boulder Highway, Las Vegas, NV 89121. NOS also
conducts business under the following business names:
International Plus, O11, INETBA (or Internet Business
Association), and I-Vantage. ANI is a California
corporation, whose principal address is 3660 Wilshire
Boulevard, Suite 400, Los Angeles, CA 90010. ANI also
conducts business under the business names HorizonOne
Communications (``HorizonOne'') and QuantumLink
Communications (``QuantumLink''). All of the entities
identified herein have in common either the same principals
or officers. For purposes of this NAL, the term ``NOS'' or
the term ``ANI'' (collectively ``companies'') includes all
of NOS's and ANI's respective identified entities, including
any of their respective successors or assigns.
2 47 U.S.C. § 201(b).
3 According to NOS and ANI, the limited residential plans,
sold under the International Plus and O11 company names, do
not employ the call unit rate structure but are sold,
tariffed, and billed as cents per minute offerings. For
this reason, the International Plus and O11 service plans
will not be addressed in this NAL. See NOS and ANI's
September 14, 2000 joint response to our September 28, 2000
letter of inquiry, Attachment B, page 1 (``Response'').
NOS and ANI requested confidential treatment of certain
information they submitted in response to written requests
from the Enforcement Bureau. On November 3, 2000, the
Bureau released an Order denying the request for failing to
comply with the standards set forth in section 0.459(b) of
the Commission's rules. NOS Communications, Inc., DA 00-
2479 (Enf. Bur., Nov. 3, 2000), citing 47 C.F.R. § 0.459(b).
On November 9, 2000, NOS and ANI filed an Application for
Review of the Order. Because, in this NAL, we use only
materials submitted by complainants and make no specific
reference to information provided by NOS and Affinity under
their request for confidential treatment, we decline to
address the merits of the pending Application for Review.
The Application for Review will be addressed separately.
4 The call unit may equal a minute under very limited
circumstances, such as for facsimile calls and during
certain limited promotional periods.
5 See footnote 29, infra.
6 See e.g, Informal Complaint No. G2000010809, filed December
8, 1999; Informal Complaint No. P-20826, filed June 6, 2000;
Informal Complaint No. G2000017422, filed February 23, 2000;
Informal Complaint No. G2000009619, filed December 3, 1999;
Informal Complaint No. 00-G6806, filed August 22, 2000;
Informal Complaint No. G2000015040, filed February 2, 2000;
and Informal Complaint No. G2000010163, filed December 17,
1999.
7 See e.g, Informal Complaint No. G2000016345, filed February
1, 2000 (``I am at my wits end. I cannot take trying to
communicate with these people. I believe they are trained
to lie and deceive.'); Informal Complaint No. 00-G6806,
filed August 22, 2000 (``Affinity always said they couldn't
figure out how the rate kept going up. It was always the
same song and dance. A credit was issued after many phone
calls to clarify the problem and after months had gone by.
Sometimes they would offer us a discounted rate if we would
excuse their errors.''); Informal Complaint No. G2000009619,
filed December 3, 1999; and Informal Complaint No. 00-G6806,
filed August 22, 2000.
8 See e.g, Informal Complaint No. G2000005500, filed November
12, 1999 (``They are virtually holding my toll free numbers
hostage. My only choice seems to be to pay the disputed
invoice at these exhorbitant rates or lose my toll free
numbers that I have had for so many years.''); Informal
Complaint No. 00-G943, filed May 24, 2000 (``I was also told
my 800 number has been taken over by NOS. They will not
allow me to have MCI World Com take over until I pay the
entire bill.''); Informal Complaint No. G2000000524, filed
November 15, 1999 (``I had made several attempts with MCI to
have all our lines switched to MCI but somehow Affinity
would not let go of our 800 numbers.''); Informal Complaint
No. P5493, filed January 18, 2000 (``They have sent me a
letter threatening legal action since I only paid 75% of my
Nov. 18, 1999 invoice as told to do by their customer
service representative.''); and Informal Complaint No.
G2000016345, filed February 1, 2000 (``I then received my
first threatening letter from NOS . . . telling me they
would shut off my service if I did not pay . . . and send me
to collections. The frustrating thing is that everyone I
spoke to in the company directed me NOT to pay the bill
until the credit was applied.')
9 See e.g., Informal Complaint No. 00-G372, filed May 24, 2000
(``NOS refused to switch me back to my previous long
distance provider . . . and local toll provider . . . when I
was not satisfied with its services.''); Informal Complaint
No. G2000016321, filed February 1, 2000 (``I have asked
repeatedly to have my long distance service terminated, but
to date they have not terminated my service. I can't find a
way to get away from the company.'').
10 See footnote 3, supra.
11 47 U.S.C. § 201(b).
12 Business Discount Plan, Inc., Order of Forfeiture, 15 FCC
Rcd 14461 (2000) (``BDP''), recon. granted in part and
denied in part, FCC 00-424 (2000); AT&T Corp., 71 RR2d 775
(1992); Telecommunications Research and Action Center and
Consumer Action, 4 FCC Rcd 2157 (Com.Car.Bur. 1989); see
also Joint FCC/FTC Policy Statement For the Advertising of
Dial-Around And Other Long-Distance Services To Consumers,
15 FCC Rcd 8654 (2000).
13 This opinion is reflected in many of the consumer complaints
received by the Commission. One complainant writes: ``It
took me about 2 hours to simplify their `magic formula' (I
am a software engineer with a strong math background). I
didn't like it, because it looked to me as a good way for
confusing and cheating customers.'' Informal Complaint No.
00-G372, filed May 24, 2000. Another complainant writes
that NOS's call unit rate structure ``turns out to be a
convoluted formula constructed to gouge customers.''
Informal Complaint No. G2000017422, filed February 23, 2000.
Another writes, ``[T]he Total Calling Unit, which doesn't
easily translate to cost per minute charges but serves to
confuse the customer into thinking that costs are less than
they are.'' Informal Complaint No. P13117, filed March 20,
2000. Still, another complains: ``Upon review we noticed we
were not being billed in minutes, but in `TCU's'. What's
that? Who can calculate it?'' Informal Complaint No.
G2000009309, filed December 8, 1999.
14 Although NOS and ANI represent that they widely disseminate
documents similar to this one to customers and prospective
customers, they have requested that we afford confidential
treatment to those they have submitted in response to our
requests. See supra, footnote 3. Since we obtained this
document not from NOS or ANI, but from a consumer complaint
file, the companies' request for confidentiality does not
pertain to this document. See Informal Complaint No.
G2000007824, filed November 26, 1999.
15 The example states ``5 ICUs/1 MCU = $0.0754.'' It appears
that the sum of the product has been divided by 10 and that
certain numbers have been transposed in error, as $0.149 x 5
ICUs equals $0.745 and not $0.0754.
16 The example states ``85 ICUs = $1.2665.'' Again, the sum of
the product appears to have been divided by 10 to arrive at
$1.2665, instead of $12.665.
17 The example states ``95 ECUs = $1.4155.'' Once again, the
sum of the product appears to have been divided by 10 to
arrive at $1.4155, instead of $14.155.
18 The example states that the sum of the charges ($0.0754 +
$1.2665 + $1.4155) equals $2.7574.
19 We divided by 10 to bring our calculation in conformity with
the example.
20 NOS's and ANI's customer invoices detail the duration of
each call, not in minutes, but in total call units. From
the foregoing example, the call duration in minutes is a
necessary component for performing the conversion
calculation. Thus, without the call duration in minutes,
the customer is unable to perform the conversion calculation
and unable to verify the accuracy of the amount, or
determine the cent per minute rate, being billed per call.
One complainant writes that ``[s]ince the invoice does not
indicate the amount of time utilized on each call it is not
possible to calculate the precise charge.'' Informal
Complaint No. P-16219, filed April 10, 2000 . Yet another
complains that ``[t]he billing was not understandable in a
clear and simple manner because it was based on `call
units', and not minutes.'' Informal Complaint No. P-20826,
filed June 6, 2000.
21 We are continuing to review NOS's and ANI's current plan
offerings for compliance with section 201(b) and will not
hesitate to take further action if deemed necessary.
22 Although NOS and ANI represent that they widely disseminate
documents similar to this one to customers and prospective
customers, they have requested that we afford confidential
treatment to the ones they have submitted in response to our
requests. See supra, footnote 3. Since we obtained this
document not from the companies, but from a consumer
complaint file, their request for confidentiality does not
pertain to this document. See Informal Complaint No.
G2000014881, filed February 1, 2000.
23 In other examples of the rate sheet submitted by NOS and
ANI, the purportedly limiting or qualifying information
directs the consumer to a ``Welcome Package'' for additional
information. We believe that the fact that additional
information might be available elsewhere is insufficient to
form the required disclosure.
24 The materials submitted by NOS and ANI under a
confidentiality request include additional rate sheets.
Those rate sheets appear similarly to mislead consumers.
25 Although NOS and ANI represent that they widely disseminate
documents similar to this one to customers and prospective
customers, they have requested that we afford confidential
treatment to the ones they have submitted in response to our
requests. See supra, footnote 3. Since we obtained this
document, not from the companies, but from a consumer
complaint file, their request for confidentiality does not
pertain to this document. See Informal Complaint No.
G2000016321, filed February 1, 2000.
26 47 CFR § 64.1160.
27 Id. at (a).
28 Id. at (b).
29 We also find that NOS and ANI did not cure the apparent
violations of section 201(b) by verbal disclosures.
Although NOS and ANI, in their Response, allege that sales
representatives make required verbal disclosures during
telemarketing calls that the pricing offered is in cents per
call unit, such disclosures appear only relevant to the
companies' current plan offerings, which do not include a
cents-per-minute rate. Additionally, consumer complaints
further suggest that verbal disclosures did not cure the
apparent defects. See e.g. Informal Complaint No.
G2000009619, filed December 19, 1999 (``I do not recall ever
being told by anyone at ANI that this was a promotional
rate, which would last for 2 months only. . . I also do not
recall anyone telling me about ANI's policy of automatically
converting `minutes' to `total call units' (TCU's) on the
third month.''); Informal Complaint No. G2000010809, filed
December 8, 1999 (``My decision to switch to ANI was based
on their advertised rate. This was further supported during
phone conversations. . . during which the 7.9 cents per
minute rate was confirmed. . .'); and Informal Complaint No.
G2000006122, filed November 17, 1999 (``From my first
conversation with NOS, the cost per minute for long-distance
has been discussed. . . Always I received a response with no
correction as to the `per minute' term.'').
30 47 U.S.C. §503(b)(1)(B); see also 47 C.F.R. § 1.80(a)(2).
31 47 U.S.C. § 503(b)(2)(B); see also 47 C.F.R. § 1.80(b)(2)
(Amendment of Section 1.80 of the Commission's Rules, Order,
12 FCC Rcd 1038 (1997)(inflation adjustment to
$100,000/$1,100,000); Amendment of Section 1.80(b) of the
Commission's Rules and Adjustment of Forfeiture Maxima to
Reflect Inflation, Order, 15 FCC Rcd 18,221 (2000)(inflation
adjustment to $120,000/$1,200,000)).
32 15 FCC Rcd 14461 at 14471-72.
33 The total volume of rate sheets submitted by the companies
appears to number in the hundreds. At the total proposed
forfeiture amount of $500,000 per company, this would equal
just 12.5 violations per company if the Commission were to
impose a forfeiture of $40,000 per violation.
34 See CCN, Inc. et al., 12 FCC Rcd 8547 (1997).
35 Payment of the forfeiture amount may be made by mailing a
check or similar instrument payable to the order of the
Federal Communications Commission, to the Forfeiture
Collection Section, Finance Branch, Federal Communications
Commission, P.O. Box 73482, Chicago, Illinois 60673-7482.
The payment should note the "NAL/ Acct. No." referenced
above. The response, if any, must be mailed to Catherine W.
Seidel, Chief, Telecommunications Consumers Division,
Enforcement Bureau, Federal Communications Commission, 445
12th Street S.W., Room 3-C365, Washington, D.C., 20554, and
must include the "NAL/Acct. No." referenced above.
36 The Commission issued an order of forfeiture in the matter
last July, 15 FCC Rcd 14,461 (2000), and denied a petition for
reconsideration in December, 2000 WL 1785129 (Dec. 7, 2000).
37 The Commission cited AT&T Card Issuer Identification Cards.,
Letter, 7 FCC Rcd. 7529 (1992), as standing for the proposition
that it had previously ``found unfair and deceptive marketing
practices by common carriers constitute unjust and unreasonable
practices under section 201(b).'' But that case did not squarely
raise the section 201(b) issue. It concerned statements that
AT&T had made in literature sent to card holders, telling them
that ``government requirements'' required the company to issue
new cards and asking them to destroy their old cards. The
Commission staff determined that the language might lead
customers to destroy cards issued by companies affiliated with
AT&T, and it sent a letter of admonishment to AT&T. But it never
actually addressed the section 201(b) question, and the
Commission's suggestion that the case supports its regulation of
common carrier advertising under section 201(b) is disingenuous.